At its AGM this month the C&C board told investors that sales for key US hard apple cider brand Woodchuck – bought for a premium price as part of Vermont Hard Cider for $305m late last year – grew just 3%, below the industry average, due to significant volume losses in on-premise channels.
Admitting that rival brand Angry Orchard – owned by larger rival the Boston Beer Company – took the lead in early June, C&C executives told shareholders that rapid US growth in cider – sales as a percentage of beer are nearing 1% – offset its market share losses.
US rivals grow faster
C&C gained a 20% share of US cider when it bought West Coast brand Hornsby for $25m in November 2011, and another 40% when it bought Vermont Hard Cider (with its dedicated cidery) for $300m in October.
CEO Stephen Glancey admitted C&C had “not meaningfully participated in category growth” during Q2, but defended the Vermont acquisition.
“Over time, with 150 people and a third of them in sales, distribution in all the states, it gives us a footprint that we think we can grow, with the Magners brand, English brands and also new US brands,” he said.
“We all recognize that it was a very full price. But in the longer term think it will be a good deal for shareholders.”
We asked an analyst following C&C, who asked not to be named, why he thought the company was under-performing in the US: “There clearly are problems there. The 15% number relates to the off trade – that’s all we get visibility on. In actual fact that turned out to be spot on.
“What that means though, is that they had declines in the on trade, and I want to find out what’s going on. Why is it happening? I don’t know – I can speculate. It might be distributors, being shoved out by competition.”
Major brewers turning screw?
Asked if he thought C&C was suffering as major brewers – all of whom are far larger firms, Heineken is the world’s largest cider maker, C&C is No.2 – entered the hard apple cider sector, the analyst said he thought not.
“You have to remember that in the US cider is in tiny. Some people think you’re talking about a soft apple drink. That’s why you have to say ‘hard cider’,” he said.
“It represents less than 0.5% of the total drinks market in the US. That’s where you’re starting from. But a quarter of the total volume increase over the past year in the US was Angry Orchard.”
Looking at the percentages you could say ‘Miller Coors [Crispin Cider Company] or AB InBev [Stella Artois Cidre was launched in May] products have seen 100% growth’, but that was from very low numbers, he added.
“The brewers haven’t really yet put much in the way of marketing spend behind cider. That’s not to say they aren’t using a bit of muscle in terms of distribution, and maybe there is an element of C&C being shoved out.
“It would seem to me, at first glance, that if they’re being pushed out by anyone in the on trade then it’s Boston Beer. But I don’t know that, and I’d like to know if that is the case or not,” the analyst added.